Bookshelf: That pioneering spirit

This story of the birth of the US motor industry shows that the business model has not changed in almost a century.

by Roger Putnam
Last Updated: 23 Jul 2013

By bringing the two principal characters in Billy, Alfred and General Motors alive, Pelfrey has captured the pioneering spirit that inspired the creation of an industry that has dominated the American way of life for over a century. His book tells the story of the lives of two unique men, totally different in so many ways but united in a burning obsession to create a company that was to become the most successful in the history of the US.

Billy Durant, the man whose vision, courage and natural salesmanship brought together the group of companies that soon became General Motors, was the ultimate pioneer. The man who replaced him at the helm over a decade later could not have been more different. Alfred Sloan was the intellectual, who, it is said, coined the term 'professional manager', no doubt thinking of himself as the role model. Durant had no time for management processes or delegation, and as a result lost control of the company on two occasions; the second time for ever. Sloan was the ultimate process monitor; perhaps to the point of obsession.

However, this is not just a book about GM or its creators. This is the story of the birth of the American motor industry. Its stars are still household names: Ford, Chevrolet, Buick and Olds. We are not talking the car brands that we know today, but the names of the men learning their trade through trial and error - juggling nascent technologies with the need to finance growth, learning production techniques on the run, and all the time competing with the 200 other auto companies struggling to succeed at the start of the 20th century.

Anyone who has experience of the car industry today cannot help thinking plus ca change at every turn of the page. The business model that Sloan created after Durant's ousting from GM in 1920 has not changed in almost a century. Unlike the dynamics that shaped the car industry elsewhere, the American pioneers learnt early on that if you got the price right, you could sell the volume. If you made the volume efficiently, then you could get the right price.

This price/volume equation was almost self-perpetuating once the US consumer fell in love with the car, and profits came very quickly. Little changed in the following century until the massive rise in oil prices put GM's and Ford's backs to the wall. However, even back then once the volume was established, these early pioneers did not have the management structures in place to cut back quickly enough in time of recession. The early years were a rollercoaster of boom/bust, but Sloane's tight management ensured GM was able to stay profitable even during the Wall Street crash of 1929 and the Depression that followed.

It was shortly after the crash that Sloan was guilty of an error of judgement that probably did more to shape the future of GM and the problems faced by the US car industry today than any other. He became obsessed with the role of trade unions in general and the UAW in particular. The sit-down strikes of the 1930s, which started at GM's body plants, brought the car industry to a standstill. Sloan would not meet with the union representatives and delegated the role to his manufacturing management. His stance was so intransigent that he even fell out with the government's secretary of labour, to the point that he was convinced that the government was in league with the UAW.

What followed was a climbdown by GM and concessions to the workers that became ever more generous even into the '50s and '60s, while Sloan was still at GM. Sloan never accepted responsibility or culpability for the strikes, and bitterly opposed everything the unions stood for until his dying day. Those generous settlements left a legacy of health and pension rights that means today GM has to spend over $2,000 a car to support them, more than the cost of the steelwork in the vehicle.

Pelfrey's book is easy to read and extremely well researched, even though Durant left little in the way of documents and Sloan left only what he wanted to leave. One is struck with awe at the speed with which GM was created and became profitable. Durant's vision was immense, but he was thrown out of the company and was never properly credited for his achievement.

As Pelfrey says: "For better or worse, executives and employees all over the globe, in all kinds of businesses, are dealing with the effects of precedents set in motion by what these two men wrought in the first half of the 20th century."

Billy, Alfred and General Motors: the story of two unique men, a legendary company and a remarkable time in American history, William Pelfrey, Amacom, £16.99, ISBN: 0-814-40869-9.

- Roger Putnam has recently retired as chairman of Ford UK after 40 years in the motor industry. He is president of the Society of Motor Manufacturers and Traders, and a visiting professor of automotive studies at City of London University.

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